Not a time for favours 

8 February 2010 tbs.pm/1126

BSkyB agrees to cut ITV stake

In recent weeks it has been obvious that the “love affair” between politicians and BSkyB – at least in public – has started to thaw, even to the extent that David Cameron’s Tories have not yet proffered an open allegiance to the Murdochs this time round with an election on the horizon.

This helps to underline the weakening effects that new media has had on the old guard, with Google and Microsoft, etc., now displacing much of the power that traditional newspapers once had in terms of both influence and financial clout, despite News Corp.’s (and others) last-ditch roll of the dice with the erection of paywalls for their online news services.

Of course it’s perfectly possible that all of BSkyB’s prior kicking and screaming was just for show, since it knew from the very beginning that a stake in ITV would be highly contentious from a competition viewpoint even if it hadn’t technically broken the letter of the law in terms of media ownership quotas.

(Remember that the door had been previously left open for a BSkyB acquisition of Channel Five, and BSkyB’s Picnic terrestrial service had been more or less canned on a technicality as opposed to any monopolistic objections.)

And BSkyB is no stranger whatsoever to making business decisions that surprise and shock its competitors for maximum psychological effect, since its dominance and power allows this sort of thing to go on relatively unchecked as long as it doesn’t break any obvious rules. (Whilst perhaps bending a few minor points along the way.)

Even if it means losing a fair amount of money in the process; this doesn’t matter to BSkyB if your competitor fails to gain assets and power as a consequence, since this form of strategy is much more important to BSkyB as part of its long-term game plan.

This also even went as far as an aborted attempt on the terrestrial pay-TV market with Picnic; exactly the sort of service which had been openly rejected by BSkyB on more than one previous occasion, and was a barely-disguised ploy to drive Setanta’s UK pay-TV operation into the ground, which of course did happen with the help of a recession.

So what next for BSkyB and ITV plc? BSkyB’s ITV stake may have been a NTL/Virgin Media-ITV takeover deterrent, but it wouldn’t have stopped anyone else with deeper pockets having a go. But there wasn’t anyone else who was rich/mad/incentivised enough to buy ITV shares at the time, and this was before the recession came along.

Of course ITV plc’s share price has picked up from the low point that originally triggered the prospect of a hostile takeover, but the stalking horses that surrounded ITV at the time of BSkyB’s original share purchase still in the main exist, apart from perhaps a less eager Virgin Media (plus there were NBC Universal share ownership changes last year).

At this point in time, ITV’s greatest wishes relate to financial stability and its ability to make lots of money; it has already jettisoned a lot of its “historical baggage” including most of its former regional structure and is hoping to do the same with regional news as well shortly.

What happens to regional news in itself could affect ITV plc’s share price, even though investing in regional news is a public asset in itself, hence the recent Channel 3 regional news proposals that may or may not come to fruition depending on how fast the Digital Economy Bill can be pushed though Parliament/who gets into power at the next election.

Whether someone or something will come along to make ITV plc’s dreams come true is another matter, but the income offered by current reality TV formats and its tried and tested soap offerings cannot be guaranteed for eternity let alone the next five years, plus its share price could turn volatile again regardless of what happens later this year.

A member of the Transdiffusion Broadcasting System
Liverpool, Thursday 8 June 2023